Interim Condensed Consolidated Financial Statements 2011

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(1)Interim Condensed Consolidated Financial Statements. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. 2011.

(2) Interim Condensed Consolidated Financial Statements 2011. CONTENTS Report on Operations The ACEA Group. 4. Corporate bodies. 5. Group operating review. 6. Economic and financial review. 59. Other Information. 85. Significant events after the balance sheet date. 93. Risks and uncertainties. 94. Operating and Financial Outlook. 102. Explanatory Notes to the Financial Statements Interim Consolidated Income Statement. 106. Interim Consolidated Comprehensive Income Statement. 107. Statement of Consolidated Financial Position. 110. Consolidated Cash Flow Statement. 111. Statement of Changes in Consolidated Equity. 112. Basis of Presentation and Consolidation. 113. Accounting standards and policies. 116. Consolidation policies and procedures. 121. Basis of Consolidation. 125. Financial Highlights of Companies accounted for under Proportionate Consolidation Segment Information. 130. Notes to the Consolidated Income Statement. 132. Notes to the Statement of Consolidated Financial Position. 168. Service Concession Arrangements. 217. Related Party Transactions. 231. Update on major disputes and litigation. 239. Commitments and contingencies. 248. Annexes. 251. Declaration of the Executive Responsible for Financial Reporting. 274. Report on Operations. 2. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. 129.

(3) Interim Condensed Consolidated Financial Statements 2011. Report on Operations. 3. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Report on Operations.

(4) Interim Condensed Consolidated Financial Statements 2011. The ACEA Group The share capital of ACEA S.p.A. at 30 June 2011 is broken down as follows:. comune di Roma Mercato. municipality of Rome market. * The above chart only shows equity investments of more than 2%, as confirmed by CONSOB data.. Report on Operations. 4. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. As at the same date, the Group structure comprises the following main companies:.

(5) Interim Condensed Consolidated Financial Statements 2011. Corporate bodies Board of Directors (appointed by the Shareholders' Meeting on 29 April 2010) Giancarlo Cremonesi Marco Staderini Paolo Giorgio Bassi Francesco Caltagirone Jean Louis Chaussade Aldo Chiarini Paolo Di Benedetto Luigi Pelaggi Andrea Peruzy. Chairman Chief Executive Officer Director Director Director Director Director Director Director. General Manager (appointed by the Board of Directors in the 27 October 2010 session; the office was taken up on 1 February 2011) Paolo Gallo. Board of Statutory Auditors (appointed by the Shareholders' Meeting on 29 April 2010) Chairman Standing Auditor Standing Auditor Alternate Auditor Alternate Auditor. Independent Auditors Reconta Ernst & Young S.p.A. Executive Responsible for Financial Reporting Giovanni Barberis. Report on Operations. 5. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Enrico Laghi Corrado Gatti Alberto Romano Gianluca Marini Leonardo Quagliata.

(6) Interim Condensed Consolidated Financial Statements 2011. Group operating review Networks Industrial Segment During the first half of 2011, electricity demand in Italy (162,895 GWh)1 increased by 1.6% over the same period of the previous year. 86.1% of the need for electricity was covered by national production (65.5% by thermoelectric energy, 14.7% by hydroelectric sources and 5.9% by geothermal electricity production and other renewable sources) and imports from abroad covered the remaining portion of 13.9%. In that context, net national production (141,316 GWh) increased slightly, -1.0%, while the balance with abroad showed a slight decrease (- 0.7%). Except for hydroelectricity (- 11.3%), all of the sources of national production increased compared to the same period of the previous year. The significant increase in photovoltaic production is to be noted (+284.6%). 1 gennaio ‐ 30 giugno 2011. 1 gennaio ‐ 30 Var. % giugno 2010 2011/2010. ‐Idroelettrica ‐Termoelettrica ‐Geotermoelettrica ‐Eolica ‐Fotovoltaica Produzione Netta Totale di cui produzione CIP 6 Importazione Esportazione Saldo Estero. 24.168 107.462 2.663 4.327 2.696. 27.255 105.304 2.517 4.209 701. ‐11,3 2,0 5,8 2,8 284,6. 141.316 13.856. 139.986 18.699. 1,0 ‐25,9. 23.638 894 22.744. 23.859 944 22.915. ‐0,9 ‐5,3 ‐0,7. 1.165 162.895. 2.595 160.306. ‐55,1 1,6. Consumo pompaggi Richiesta di Energia Elettrica. Demand for electricity = net production + balance of imports – consumption for pumping systems gennaio giugno produzione netta idroelettrica termoelettrica geotermoelettrica eolica fotovoltaica produzione netta totale di cui produzione CIP 6 importazione esportazione saldo estero. 1. January June net production hydroelectric thermoelectric geothermal electricity wind photovoltaic total net production of which CIP 6 production import export overseas balance. Source: Terna – June 2011, monthly report on the electricity system.. Report on Operations. 6. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Produzione Netta.

(7) Interim Condensed Consolidated Financial Statements 2011. consumo pompaggi richiesta di energia elettrica var.. consumption for pumping systems electricity demand increase/(decrease). Electricity transmission In the first six months of 2011, the total electricity issued into the ACEA Distribuzione network (from the National Transmission Grid, from electric power generating plants directly connected to the ACEA Distribuzione network and from the interconnected ENEL Distribution network) recorded a decrease of 0.30% compared to the amount of energy issued during the same period of the previous year. The maximum power required on the ACEA Distribuzione network during the first six months of 2011 came out at 2,014 MW and was recorded at 6:00 PM on 26 January 2011. This value was approximately 50 MW lower (-2.41%) than the corresponding number recorded during the first half year of the previous year, which came out at 2,064 MW on 26 January 2010 at 6:00 PM. Although the electricity demand on the ACEA Distribuzione network during the first six months of 2011 was tendentially consistent with the previous year, it was marginally affected by the weather. The climate had the highest impact in May and June, during which the alternation between higher temperatures in May and milder temperatures in June led to change in electricity requirements equalling +1.87% and -1.89%, respectively. The graph below shows the trend in the reference temperature2 recorded in the first corresponding months of 2011 and 2010.. 2 The reference temperature (TDR) is defined as the weighted average of the daily temperature highs and lows which better reflects the effect of the weather on electricity demand. The reference temperature trend shown in this report was drawn up on the basis of updates to historical series carried out following the drafting at the end of the half in 2010.. Report on Operations. 7. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. half of 2011 and the average monthly difference of said parameter calculated in the.

(8) Interim Condensed Consolidated Financial Statements 2011. TDR Delta (TDR '11 vs TDR '10). TDR 2011. 5.00. 25. TDR Delta (TDR '10 vs TDR4.00 '09). 20 3.00 15 TDR. 2.00 1.00. 10. 0.00 5 -1.00 -2.00. January. February. Marc h. April. May. June (*). TDR Delta (TDR '11 vs TDR '10). 0.66. 0.06. 0.11. 1.51. 1.71. -0.23. TDR 2011. 8.12. 8.28. 10.66. 15.54. 18.89. 22.32. 0. The following table shows the monthly percentage variations of electricity injected into ACEA Distribuzione’s network, which were calculated on the basis of the volumes recorded in the corresponding periods of 2010 and 2011, as registered by the related measurement system (raw series) and as resulting from the calculations3 made in order to counterbalance the effects of the said weather conditions and the different calendar days (purified series): MONTHLY PERCENTAGE VARIATIONS – RAW SERIES, PURIFIED SERIES 2011 Vs. 2010. January. February. March. April. May. June. Total. "RAW" SERIES. -0.95%. -0.97%. 0.82%. -0.53%. 1.87%. -1.89%. -0.30%. "PURIFIED" SERIES. -0.42%. -0.70%. 1.74%. 1.72%. 1.35%. 1.00%. 0.77%. The following table shows the monthly sequence of electricity injected into ACEA for 2010: ELECTRICITY INJECTED INTO ACEA’S NETWORK (GWH) 2011 Vs. 2010. January. February. March. April. May. June. Total. 2011. 1,033.65. 944.32. 1,004.68. 888.53. 937.86. 990.38. 5,799.42. 2010. 1,043.61. 953.59. 996.55. 893.25. 920.65. 1,009.49. 5,817.14. 3 Energy figures which discount the impact of the weather and the calendar were calculated by using declimatisation, de-calendarisation and de-seasonalisation parameters updated after the close of the half in 2010.. Report on Operations. 8. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Distribuzione’s network during the first half of 2011, together with the same series.

(9) Interim Condensed Consolidated Financial Statements 2011. These electricity amounts were intended to cover the needs of the utilities supplied by the above-mentioned network, i.e. the customers of the free and protected markets and of the market subject to additional safeguards, as well as the so-called underlying distributors, which are represented by the electricity company of the Municipality of Saracinesco. There are also sales and injections of energy between the ACEA Distribuzione’s network and ENEL Distribuzione’s networks at some LV, MV and HV interconnection points. With regard to the first half of 2011 and as compared to the same period of 2010, the. following. table. illustrates. the. above-mentioned. aspects,. with. further. specification of the contribution given by Acquirente Unico S.p.A. and by the import supply. Market subject to additional safeguards. Free market. Underlying distributors. Total. AU Source. Other Sources. GWh. GWh. GWh. GWh. GWh. 2011. 1,821.19. 214.36. 3762.43. 1.44. 5,799.42. 2010. 2,057.50. 214.36. 3543.93. 1.36. 5,817.15. With regard to import supply, as from 1 January 2002 ACEA Distribuzione signed an agreement with the Vatican City State (that was renewed on 6 July 2006) in force from 1 January 2007 to 31 December 2011, for the optimised management of indications provided by the Italian Authority for Electricity and Gas, based on the Decree issued by the Ministry for Productive Activities - now the Ministry of Economic Development - that sets out the assignment of transmission capacity shares to the interconnection with foreign countries for the Vatican City State and the Republic of San Marino). In this context, the Company undertook to provide technical services linked to the management of underlying utilities to the above-mentioned State, as well as to rationalise and improve any related electricity network and plant.. Report on Operations. 9. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. imported electricity assigned to it (established by Terna, in accordance with the.

(10) Interim Condensed Consolidated Financial Statements 2011. Service quality On 24 December 2007 the Italian Authority for Electricity and Gas issued Resolution no. 333/07 regarding the third regulatory period from 2008 until 2011. Resolution no. 333/07 introduces and governs four different types of regulation, amending the two pre-existing ones and supplementing the current legislation, as follows: 1. Regulation of prolonged or extended outages; 2. Individual standards regarding the number of outages for MV customers; 3. Regulation of the total duration of long outages without advance warning; 4. Regulation of the average number of long and short outages. On 27 April 2009, the Authority then issued consulting document DCO 9/09 “Electricity distribution service continuity - Urgent review of some provisions concerning the regulation of the number of outages without advance warning and the 2008-2011 trend levels”. Following the end of the consultation process, the Authority issued Resolution ARG/elt no. 76/09 that implements the observations received from the entities concerned, by amending Annex A of Resolution no. 333/07 of 19 December 2007, with the postponement of the relevant deadlines for the termination of the procedure pursuant to paragraph 22.4, Annex A for 2008 and the deadlines pursuant to point 2 of Authority Resolution no. ARG/elt 168/08 of 25 November 2008. The main changes can be summarised as follows: •. change in the selection rule of exceptional long outages starting in “periods of outages that is necessary in order to identify the “periods of perturbed conditions” (upper limit), by making a distinction between low voltage and medium voltage;. •. exclusion of all long outages without advance warning which start in periods of perturbed conditions, with regard to the number of outages, similarly to the provisions in force for short and temporary outages;. •. extension of the above-mentioned provisions to the duration of outages, excluding all long outages starting in periods of perturbed conditions;. •. postponement of the deadlines set out in point 2 of Resolution ARG/elt 168/08 for the delivery of continuity data and the calculation of starting and trend levels for distribution companies, pursuant to paragraph 30.1 of the Integrated Code,. Report on Operations. 10. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. perturbed conditions”, with the introduction of a threshold for the number of.

(11) Interim Condensed Consolidated Financial Statements 2011. which opted for three-year levels of continuity indicators, instead of two-year levels; •. postponement of the deadlines and obligations provided for with regard to service continuity, which are relevant for the procedure concerning service continuity for 2008;. •. exclusion of outages due to thefts from electricity distribution plants, from Title 7 of the Integrated Code.. Reporting activities in 2010 were concluded within the deadlines established beforehand by the Regulator (by 31 March 2011). The results of the aforesaid reporting are still awaiting AEEG's approval. Regulatory Framework Please see the Interim Report on Operations as at 31 March 2011 for a description of the resolutions adopted by AEEG during the first quarter of 2011. The decisions made and consulting documents issued by AEEG during the second quarter of 2011 are listed below: 14 April 2011 - Resolution ARG/elt 46/11: Launch of procedure for setting up arrangements on compensating expenses for the supply of electricity to customers with serious health conditions pursuant to the Interministerial Decree of 28 December 2007. Following the decree's identification of the list of electrical medical and therapeutic equipment necessary to maintain people with serious health conditions alive, AEEG began a procedure aimed at governing methods of compensating end customers in equipment. The measure will supplement the regulation which provides for financially compensating parties with serious health conditions (the electricity bonus). 21 April 2011 - Consulting Document DCO 10/11: Electricity and natural gas retail market monitoring system.. Report on Operations. 11. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. this situation, in order to offset the higher electricity costs caused by the use of this.

(12) Interim Condensed Consolidated Financial Statements 2011. AEEG set forth its proposals in relation to the system for monitoring the electricity and gas retail markets (retail monitoring), to be implemented by introducing specific indicators. As regards distribution companies, reference is made to: •. the switching rate, a parameter which will need to be sent on a quarterly basis instead of the current annual basis;. •. the times for providing estimates for simple work, executing simple work and activating supplies (submission on an annual basis with the same procedures as those set forth for collecting commercial quality data).. 21 April 2011 - Consulting document DCO 11/11: Review of low-voltage metering service revenue equalisation mechanism pursuant to article 40 of the Transport Code for the years 2010 - 2011. AEEG submitted some corrections to the low-voltage metering service revenue equalisation mechanisms, suspended by resolution ARG/elt 228/11 due to the undesired effects caused by the temporal misalignment between the criteria for attributing revenues admitted to cover capital costs related to: •. electronic meters and remote-control equipment (referring to the year t-2);. •. electro-mechanical meters (referring to the year t).. As it is currently set up, the mechanism in accordance with art. 40 of the Transport Code makes it so that distribution companies that are consistently late in replacing electro-mechanical meters may receive higher compensation than that which is effectively due. In general terms, AEEG's proposal includes: the introduction of a correction factor for the equalisation mechanisms, based on the minimum between the weight of the electro-mechanical meters installed in the year t-2 and the weight of the electro-mechanical meters installed in the year t; •. the redistribution of the equalisation surpluses that may be generated by the correction of the mechanism.. 21 April 2011 - Consulting document DCO 13/11: Tariff adjustment of power and reactive energy withdrawals and injections at the supply points and interconnection points between networks. AEEG proposed measures substantially revising the regulation regarding power and reactive energy absorption, aimed at making end customers responsible by causing. Report on Operations. 12. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. •.

(13) Interim Condensed Consolidated Financial Statements 2011. them to reduce withdrawals of reactive energy by installing power factor correction equipment. To this end, it is proposed that the power factor threshold value for the application of fees for reactive energy absorption be increased. Furthermore, the fee should compensate costs incurred by distribution companies, in order to cover: •. the effects on network infrastructures, with revenues included within the obligation of effective revenues for the distribution service;. •. the effects caused by the increase in network losses, with revenues included within the balance of loss differential equalisation.. AEEG assesses that approximately 20% of the total fee may be attributed to compensation for the increase in network losses, and the remaining part to the compensation of infrastructure costs. The provisions should become effective as of 1 January 2016, in order to enable: •. end customers to procure and install the power factor correction equipment;. •. distribution companies to adapt their invoicing systems as well as to reprogram the meters that are currently installed.. 28 April 2011 - Resolution ARG/elt 51/11: Authentic interpretation of the definition of "connection completion date" and amendment of Annex A to AEEG resolution of 23 July 2008, ARG/elt 99/08 and Annex A to AEEG resolution of 20 October 2010, ARG/elt 181/10, regarding electricity production plant connections. network operator is required to activate the connection within 10 business days from the connection completion date, the latter being the date on which the document is sent indicating that the connection is complete and that it is ready to become functional. AEEG specifies that in that document, the network operator must indicate a few possible connection activation dates, which must not be subsequent to the tenth business day after the connection completion date. Also, the document must be transmitted according to procedures that enable the applicant to receive it immediately (fax, email, or IT portal if available).. Report on Operations. 13. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. In relation to the timing of active connection activation, AEEG clarified that the.

(14) Interim Condensed Consolidated Financial Statements 2011. Furthermore, the same resolution extended the deadline for the preparation of an IT portal, by Terna and by other distribution companies with at least 100,000 customers, to 31 December 2011; this portal enables the exchange of information necessary for managing the connection procedure. This obligation, introduced by art. 4.1 of annex A to resolution ARG/elt 125/10 (Code for active connections), and initially set as by 30 June 2011, was postponed in order to coordinate the implementation work with that of the GAUDì control panel. 28 April 2011 - Resolution ARG/elt 52/11: Launch of the procedure to review the conventional percentage factors of electricity loss on the distribution and transmission networks. AEEG intends to review the conventional loss factors based on changes made to some system parameters which had determined their establishment in 2004. Specifically, AEEG deems that the percentage factor review must account for: •. the development of distributed generation, which could cause an increase in network losses;. •. the process of streamlining electrical networks, also from the operational point of view, which caused a decrease in network losses.. 28. April. 2011. -. Resolution. ARG/elt. 53/11:. Provisions. regarding. equalisation mechanisms for the year 2007 pursuant to article 13bis, paragraph 1, letter c) of the Retail Service Code, amendments to Annex A of AEEG resolution ARG/elt 34/09 of 27 March 2009, and the Retail Service Code. industry equalisation fund) regarding the late adjustments to metering data applicable to 2007 by next 31 May, in order to define the loss differential adjustment for the year 2007. The measure is a continuation of what was previously established by resolution ARG/elt 209/10, in which AEEG: •. suspended the loss differential adjustment for 2007;. •. requested that Enel Distribuzione send the data since differences were found between the amounts calculated by CCSE and the amounts estimated by Enel.. Report on Operations. 14. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. AEEG requests that distribution companies send information to CCSE (electricity.

(15) Interim Condensed Consolidated Financial Statements 2011. 28 April 2011- Consulting document DCO 15/11: Options and proposals for regulating the quality of electricity distribution and metering services during regulatory period 2012-2015. AEEG set forth its proposals on service quality, defining: •. the first guidelines regarding regulations incentivising distribution service continuity (part I);. •. final guidelines regarding the individual regulation of continuity for MV customers and voltage quality on MV networks (part II);. •. the first guidelines regarding the regulation of the commercial quality of distribution and metering services (part III).. The following items are specifically included amongst the DCO 15/11 proposals: •. in part I: o. the introduction of some changes to be made in the incentive system, aimed at decreasing outage duration differences between the areas;. o. removal of the upper limit of the maximum annual improvement to the trend level (currently at 6%) for the number of outages;. o. change in the system for recording outages originating on the LV network for distribution companies which use electronic meters to record service continuity;. o •. integration of the reporting register with additional information.. Part II contains the following alternative cases for regulating MV outages: o. inclusion of a specific standard associated with the number of outages recorded by MV customers, which associates brief outages with long incentive system on customers considered "not well served";. o. introduction of an MV outage incentive regulation, according to a mechanism that provides distribution companies with bonuses or penalties based on the trends of the annual number of outages per customer; this proposal was set forth by Enel Distribuzione as part of the meeting on service quality held by AEEG.. •. In part III, the change to the regulation of scheduled works on LV networks (for which the amount is determined without drawing up an estimate), with the definition of standard services that are necessarily part of the aforementioned regulation.. Report on Operations. 15. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. outages; that standard should be associated with a complementary.

(16) Interim Condensed Consolidated Financial Statements 2011. 28 April 2011 - Resolution GOP 25/11: Definition of the measure of the contribution for the operations of AEEG (Italian Authority for Electricity and Gas) for the year 2011. The contribution for the year 2011 for the operations of AEEG has been established as 0.3 thousandths of the revenues reported in the financial statements approved for the previous year (2010) for each party operating in the electricity and gas sectors. The payment must be made by 31 July 2011, through bank transfer made to the dedicated AEEG current account, while AEEG must be notified of this by 15 September 2011, by using the dedicated IT communication system set forth in resolution GOP 35/08. 5 May 2011 - Resolution ARG/elt 56/11: Amendments and supplements to the provisions pursuant to Annex A of AEEG resolution ARG/elt 107/09 of 30 July 2009 (Integrated Code to regulate the physical amounts and related financial values of the dispatch service). AEEG introduced the following changes to the timing for sending annual settlement notifications: •. only for the year 2011, the postponement from 20 May to 30 May 2011 of adjustment data notifications that reference distributors must submit to Terna, with the consequent deferment to 10 August 2011 of Terna's settlement of adjustments to dispatching users;. •. instead, beginning from the expiries of November 2011, it set forth the. 11 May 2011 - Decision 2/11: Definition, in accordance with paragraph 10.4 of AEEG resolution ARG/elt 175/10 of 18 October 2010 of when mechanisms will begin functioning concerning electricity distribution companies' processing of requests to activate and deactivate the system for compensating electricity expenses, established by Interministerial Decree of 28 December 2007, for beneficiaries of the federal assistance programme (Carta Acquisti). AEEG set 1 July 2011 as the effective date of when beneficiaries of the federal assistance programme may begin sending requests to activate and deactivate the electricity bonus.. Report on Operations. 16. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. anticipation of underlying distributor notifications to reference distributors..

(17) Interim Condensed Consolidated Financial Statements 2011. Distributors will verify requirements for eligibility for the facilitation in relation to the requests sent to them through a notification from the SGATE system (ANCI's electronic network of the Italian municipalities, which manages the bonus IT system), which in turn obtains those applications through the Carta Acquisti management IT system (SICA system) managed by INPS, through a dedicated channel of communication between the two systems. 19 May 2011 - Resolution ARG/elt 60/11: Update for the year 2009 of the value of the company-specific correction factor for the revenues admitted to cover distribution costs in accordance with Annex A of AEEG resolution 348/07 of 29 December 2007, regarding the companies ACEA Distribuzione S.p.A., Deval S.p.A., Amaie Sanremo S.p.A., ASSEM S.p.A. and Azienda Energetica Reti S.p.A. Etschwerke netz AG. Amendments to Annex A of AEEG resolution 348/07. The value of the company-specific factor (Csa) for the year 2009 has been defined. This factor assists in applying the company-specific equalisation system (PSA) to cover variances between effective distribution costs and distribution costs not covered by general equalisation mechanisms. ACEA Distribuzione's CSA factor for 2009 was set at 0.2153. On the basis of this value, CCSE will pay ACEA Distribuzione the PSA amount for 2009. 19 May 2011 – Resolution VIS 59/11: The Authority approved the programme for the inspection of electricity distribution companies with regard to the service continuity data supplied to the Authority in 2011. assessing the distributors' correct implementation of: •. the obligation to record outages with or without advance warning, either long or short outages;. •. the calculation of service continuity indicators.. The inspections shall refer to the data communicated to AEEG in 2011, and shall be broken down into: •. a procedural verification carried out through a check-list to be filled out during the inspection;. •. a verification of the outages log;. •. a verification of the log of calls regarding outages originating on the LV network;. Report on Operations. 17. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. AEEG approved 10 inspections on distribution service continuity, which aim at.

(18) Interim Condensed Consolidated Financial Statements 2011. •. a possible verification of a sample of outages.. 26 May 2011- Consulting document DCO 20/11: Options and proposals for regulating the quality of electricity distribution and metering services during regulatory period 2012-2015 As part of the procedure on the quality of transmission, distribution and metering services, AEEG submitted its proposals regarding: •. consolidation and application to the entire network of the regulation incentivising transmission service quality;. •. standard application of the regulation of relief services provided by distribution companies on the entire transmission network, including the part assigned by Enel to Terna in 2009 (the ELAT network).. In addition, DCO 20/11 makes additional proposals for transmission service quality and for aspects that involve the quality of both the transmission and the distribution, amongst which those regarding the following are noted: •. improvement of some aspects of the relief service regulation;. •. enhancement of the relief service following major incidents;. •. classification of outages into the "individual outage event", the major incident and the potential major incident;. •. distribution company service levels regarding the execution of Terna action orders following service outages;. •. introduction of obligations to publish monitoring indicators about the availability and unavailability of the elements that make up the network.. Distribuzione S.p.A. for the investigation of a violation regarding recording electricity distribution service outages. A penalty proceeding has been initiated against ACEA Distribuzione for the alleged violation of the following regulations regarding recording: •. the beginning of long outages without advance warning originating on the LV network by noting the date, hour and minute of the first report of the outage, also by telephone call, on the dedicated list;. •. all of the telephone calls received to report failures, also if an outage did not occur (requests).. The AEEG investigation is taking place following a complaint referring to a failure on the LV network (which occurred between 22 and 23 August 2009). The complaint. Report on Operations. 18. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. 26 May 2011 - Resolution VIS 60/11: Start-up of a procedure against ACEA.

(19) Interim Condensed Consolidated Financial Statements 2011. was forwarded to ACEA Distribuzione by the Consumer Protection Office, which had requested information from that company about how reports of failures from end customers were managed. ACEA Distribuzione replied indicating, inter alia, that requests for reports already entered are not managed in the system. 9 June 2011 - Resolution ARG/elt 73/11: Launch of a procedure aimed at revising the tools implemented in the Code for Active Connections in order to resolve the problem of the virtual saturation of electrical networks. AEEG expressed its intention to define tools aimed at resolving the critical issues caused by the fact that the pricing estimates accepted caused the reservation of a transmission capacity notably higher than the capacity that could be installed in the areas. AEEG had already faced this problem by introducing a guarantee within the new Code for active connections in the form of a deposit or bank guarantee, which the party requesting the connection would have to submit to the network operator for those areas that the operator defined as "critical", in addition to the payment of fees for the estimate request and to make the connection. AEEG then suspended the provision with resolution ARG/elt 9/11, following the suspension imposed by the Lombardy Regional Administrative Court (TAR) in orders no.s 8-65 of 13 January 2011. AEEG notes that it intends to draw up one or more consulting documents in order to define the tools aimed at resolving this criticality. 16 June 2011 – Resolution ARG/elt 74/11: Determination of the amount of article 40 of Annex A of AEEG resolution 348/07 of 29 December 2007 (Transport Code) for the year 2009. Redetermination of the balance of revenue equalisation amounts for the low-voltage metering service for the year 2008. With reference to the equalisation of revenues from the low-voltage metering service, AEEG noted: •. the adjustment amount compared to the amount determined by resolution ARG/elt 40/10 for the year 2008;. •. the amount set forth for the year 2009.. ACEA Distribuzione's adjustment for the year 2008 was 1,304,693.04 euros and for the year 2009 was 1,238,361.03 euros, for a total of 2,543,054.07 to be received.. Report on Operations. 19. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. revenue equalisation for the low voltage metering service pursuant to.

(20) Interim Condensed Consolidated Financial Statements 2011. 23 June 2011 - Resolution ARG/elt 80/11: Approval of Terna S.p.A.'s proposals to amend Annex A.26 and Annex A.58 to the Transmission Code, despatching development and network safety AEEG approved Terna's proposals to amend the Network Code to make some parts of it consistent with the settlement rules set forth by the Integrated Code to regulate the physical amounts and related financial values of the dispatch service, as it was subsequently amended. The following specific amendments were approved: •. to Annex A.26 (Dispatch contract template) and Annex A.58 (Convention for the metering aggregation service in accordance with AEEG resolution ARG/elt 107/09),. in. order. to. incorporate. the. metering. aggregation. incentivising regulation introduced by resolution ARG/elt 129/11 as of 1 January 2011; •. to Annex A.58, in order to incorporate the anticipation of expiries for underlying distributor notices to be sent to reference distributors for the purpose of the annual and half-year adjustments set forth by resolution ARG/elt 56/11.. 28 June 2011 - Resolution ARG/com 87/11: Updating, for the quarter 1 July – 30 September 2011, of the tariff components to cover general charges and additional components of the electricity sector and the gas sector and provisions to the equalisation fund for the electricity sector December 2009.. Launch of. the. procedure. to implement. provisions. pursuant to Legislative Decree 28 of 3 March 2011. Due to the structural character of the increase in costs pertaining to the account incentivising new plants from renewable sources and similar, AEEG set forth an additional increase in the A3 tariff component in order to: •. guarantee the applicable costs for 2011;. •. write off the back deficit from the A3 account by the third quarter of 2012.. Furthermore, AEEG specifically provided for: •. a decrease in the AS tariff component, since the account to which the socalled social tariff mechanism pertains has an accrued surplus estimated at over 30 million euros;. Report on Operations. 20. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Amendments to Annex A of AEEG resolution ARG/gas 184/09 of 1.

(21) Interim Condensed Consolidated Financial Statements 2011. •. an increase in the UC7 account, since the costs originating from measures and interventions to promote energy efficiency are expected to continuously increase in relation to the fees until the end of the current regulatory period;. •. an update to the tariff of components related to transmission, distribution and metering costs, general costs and additional components for the supply points meant for the public charging of electric vehicles (update with validity for the half-year from 1 July 2011 to 31 December 2011).. Finally, resolution ARG/com 87/11 provided for beginning a procedure to define measures regarding general costs for the electricity and gas sectors, in order to identify the procedures for covering new costs generated by Legislative Decree 28/11, specifically in relation to the incentivising of works: •. to produce thermal energy from renewable sources and to increase the energy efficiency of small sizes;. •. for the technological and industrial development for energy efficiency.. 28 June 2011 - Resolution ARG/elt 89/11: Launch of the procedure to adopt provisions related to completing the indemnity system pursuant to Annex B of AEEG resolution ARG/191/09 of 11 December 2009. In order to minimise costs for operators, AEEG postponed the entry into force of the Indemnity System regulation pursuant to Annex 2 of resolution ARG/elt 219/10, initially set forth for 1 January 2012, instead linking it to the developments of the Integrated Information System (called SII). Therefore, while awaiting the launch of SII, the simplified regulation pursuant to Annex 3 of resolution 219/10, initially set forth only for the year 2011, is being Furthermore, AEEG set forth the launch of a procedure to adopt measures regarding the completion of the Indemnity System regulation in order to minimise potential criticalities for incoming vendors, specifically as pertains to: •. the risk that end customers may not pay the CMOR fee;. •. an increase in litigation and the management of end customer claims.. Energy Services, Public Lighting and Digital Meters project In the Energy services sector, the activities of the company Arse, which has been operational since 1 April 2005, focus on four main lines of action: energy saving,. Report on Operations. 21. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. extended..

(22) Interim Condensed Consolidated Financial Statements 2011. photovoltaic power, cogeneration and the control of air quality (the “Caldaia Sicura” and “Sanacaldaia” projects). The year 2010 ended with distribution companies facing clear difficulties in achieving the energy saving objectives set by regulations, mainly by reason of the inefficient quantity of EEB on the market. Within this framework, Acea Distribuzione has been the only company able to reach its objectives thanks to the availability of bonds resulting from energy saving initiatives entered into with Acea R.S.E.. Furthermore, Enel Distribuzione requested an additional sale of EEB from Acea R.S.E. as an advance of the bond transfer set forth in the contract for 2012. EEBs were also transferred to ASM Terni, which also had difficulty in achieving its requirement. Overall in the first half of 2011, Acea R.S.E. transferred over 185 thousand EEBs from its account (table 1). The transfer to ACEA Distribuzione referred to the cancellation of the objective for the year 2010, while Enel was transferred 54 thousand EEBs in accordance with the contractual obligation set forth for 2010 and 30 thousand EEBs as an advance of the contractual obligation for 2011. Tab. 1 - EEB transfers from the Acea R.S.E. securities account in first six-month period 2011. EEB. Total. 98,685 84,158 2,716 185,559. Furthermore, final reports were drawn up regarding projects, such as for the efficiency improvement of the lighting system in the Rome metropolitan train station and of the energy consumption of the Anconella and Pontelungo aqueducts. On the regulatory level, a new decree is expected to extend and supplement the White Certificate energy savings system. Italy recently prepared the National Plan for renewable energy sources to reach the objective (17% renewable sources) set forth for 2020. The Plan identifies a national energy consumption objective of 131.2 Mtep in 2020, essentially the same as the. Report on Operations. 22. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Company Acea Distribuzione Enel Distribuzione Other companies.

(23) Interim Condensed Consolidated Financial Statements 2011. final gross consumption of 2009, with energy savings of over 30 Mtep compared to the trend. Therefore, the effectiveness of the White Certificates was confirmed as a valid tool for reaching those objectives. In light of Legislative Decree no. 28 "Implementation of directive 2009/28/EC on promoting the use of energy produced by renewable sources, amending and subsequently repealing directives 2001/77/EC and 2003/30/EC” and other existing regulations, the company is considering the possibility of developing this activity consistently with market opportunities and the saving obligations related to these regulations. This decree provides for the activity of managing the certification mechanism for white certificates to be transferred to GSE, thus entrusting ENEA with preparing at least 15 new standardised certification sheets. Furthermore, the maturity period of white certificates is matched with the useful life of the measure, identifying methods to shorten times and reduce the fulfilments to obtain the certificates while establishing criteria to determine the tariff contributions for the costs incurred by the parties obliged to achieve primary energy savings objectives. The acquisitions of type I and II bonds are described in Figure 1, while those regarding type III bonds are shown in Table 2. Fig. 1 – Performance of EEB (Energy Efficiency Bonds), Type I and II, resulting from the initiatives reported. 700,000. 600,000. 500,000. 400,000. 300,000. 200,000. 100,000. 0 EEB Products EEB by objective Acea D. EEB exceeding those accumulated. 2005. 2006. 2007. 2008. 2009. 2010. 2011. 2012. 22,733 3,897 18,836. 58,988 7,850 69,974. 127,148 15,596 181,526. 223,074 49,131 355,469. 226,859 73,335 508,993. 215,185 99,149 625,029. 169,430 143,702 650,757. 100,270 162,244 588,783. Table 2 – Performance of EEB (Energy Efficiency Bonds), Type III, resulting from the initiatives reported.. Report on Operations. 23. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. EEB.

(24) Interim Condensed Consolidated Financial Statements 2011. Year 2008 2009 2010 2011 EEB, Type III (1) 9,293 5,695 5,695 5,117 (1) 2008 FIGURES ARE CUMULATED WITH PREVIOUS YEARS’ BONDS.. TOT. 2012 2,674. 28,474. The cited insufficiency of EEBs is also due to the market performance in this first part of the year. In fact, the exchange price of EEBs on the platform managed by the GME exceeded the tariff reimbursement set forth for this year. Fig. 3a – Average price trend of EEBs - Type I TEE scam b.. Prezzo. 100 90 80 70 60 50 40 30 20 10 0. 60.000 50.000 40.000 30.000 20.000 10.000. 14 /0 03 3 /0 / 6 23 10 / -g 06 30 en-a 07 28 pr-a 07 g 04 o-0 -d 7 01 i c-a 07 p 08 r-0 -lu 8 28 g-0 -o 8 24 tt-0 -fe 8 04 b-0 -g 9 15 i u-0 -s 9 12 e t-g 09 20 en-a 10 p 27 r-1 -lu 0 23 g -n -10 15 ov-m 1 0 ar -1 1. 0. TEE scambiati. Prezzo. Prezzo = Price TEE scambiati = EEB exchanged. Weighted average price, with exchanges. Report on Operations. 2,329,003 83.10. 24. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Total Type I bonds exchanged on the market.

(25) Interim Condensed Consolidated Financial Statements 2011. Fig. 3b - Average price trend of EEBs - Type II. TEE scam b.. Prezzo. 100 90 80 70 60 50 40 30 20 10 0. 35000 30000 25000 20000 15000 10000 5000. TEE scambiati. 22-mar-11. 07-dic-10. 07-set-10. 16-feb-10. 18-mag-10. 27-ott-09. 14-lug-09. 21-apr-09. 20-gen-09. 24-giu-08. 30-set-08. 11-mar-08. 06-nov-07. 10-lug-07. 07/11/06. 27-mar-07. 28/03/06. 0. Prezzo. Prezzo = Price TEE Scambiati = EEB exchanged Total Type II bonds exchanged on the market Weighted average price, with exchanges. 1,026,259 87.95. Fig. 3c - Average price trend of EEBs - Type III TEE scam b.. Prezzo. 100,0 90,0 80,0 70,0 60,0 50,0 40,0 30,0 20,0 10,0 0,0. 14000 12000 10000 8000 6000. 2000. 28 -m 22 ar-0 -lu 6 21 g-0 - 8 20 ott-g 08 24 en-m 09 26 ar -m -09 04 ag -a -09 g 27 o-0 -o 9 19 tt-g 09 23 en-m 10 25 ar -m -10 a 27 g-1 -lu 0 19 g-1 -o 0 21 tt-1 -d 0 08 i c-m 10 10 ar -m -11 ag -1 1. 0. TEE scambiati. Prezzo. Price = Price TEE scambiati = EEB exchanged Total Type III bonds exchanged on the market Weighted average price, with exchanges. Report on Operations. 223,553 88.09. 25. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. 4000.

(26) Interim Condensed Consolidated Financial Statements 2011. Table 4 shows the annual trend of exchanges in the stock market, which shows that the exchanges made in this half-year have already reached the levels of the two previous years. Tab. 4 - EEBs exchanged on the GME market. year. EEB II. I. 2006 2007 2008 2009 2010 2011 Total EEBs. III. Total. 22,664 167,502 377,059 640,124 580,688 540,966. 11,564 58,639 114,194 285,843 322,970 233,049. 76 10 29,761 49,311 76,077 68,318. 34,304 226,151 521,014 975,278 979,735 842,333. 2,329,003. 1,026,259. 223,553. 3,578,815. The photovoltaic plants connected at 31 December 2010 are operating normally and production is in line with expectations. The programme to build photovoltaic plants continued with the opening of the sites of Giuliano di Roma and Villa Latina. Furthermore, some contracts stipulated at the end of 2010 are also being completed, such as the Montelupone and Prato plants, while others are being developed. In the first half year, connections reached 11 MWp for a general total of over 39 MWp. (tables 5 and 6). Tab. 5 - Summary of PV connection status. Plants Plants Plants Plants Plants. Province. Power (KWP). connected in 2008 connected in 2009 connected in 2010 connected in 2011 currently being connected TOTAL. 2,498 8,865 13,352 11,283 3,040 39,039. Tab. 6 - Installed power GENERAL TOTAL. 100.00%. 39,039. 92% 6% 23% 34%. 35,999 2,498 8,866 13,352. including Connected to the electricity network Connected 2008 Connected 2009 Connected 2010. Report on Operations. 26. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Plant.

(27) Interim Condensed Consolidated Financial Statements 2011. Connected 2011 Currently being connected By geographical area. 29% 8%. 11,283 3,040. 100.00% Bari Barletta-Andria-Trani Foggia Frosinone Lecce Latina Naples Potenza Rome Taranto Terni. By region. 12.7% 2.5% 7.5% 7.3% 26.4% 13.1% 1.4% 0.0% 25.5% 2.3% 1.3%. 4,950 990 2,945 2,832 10,302 5,110 553 0 9,955 888 515. 100.00% Campania Lazio Puglia Umbria. 1.4% 38.6% 58.7% 1.3%. 553 15,065 22,906 515. The Lazio region was the main reference area for the works in 2011. In May, the Commercity plant in Rome was inaugurated (5 MWp on cantilever roofs), which covers the car parks of the wholesale shopping centre of the same name, adjacent to the structures of the new Fiera di Roma. This plant allows the production of around 6,000,000 kWh per year with an annual CO2 reduction of approximately 2,766,000 Kg. The company then constructed "'turnkey" plants with approximately 7.5 MWp, in addition to those already realised in previous years (table 7), stipulating agreements with the investment companies HFV Spa and Absolute Energy Capital Tab. 7 - "'Turnkey" plants built by Arse "Turnkey" plants TERNI EN.A. (2008) TIVOLI (2008) CCAniene (2009) Oricola (2010) Montelupone (2010) Prato (2010) Scalea2 (2011) Pomezia (2011) TOTAL. Province Terni Rome Rome L'Aquila Macerata Potenza Cosenza Rome. Power (KWP) 419 3 58 767 727 994 2,623 4,991 10,582. On 5 May 2011, the "Romani Decree" was enacted, which limited the validity of the third energy account to 31 May of this year.. Report on Operations. 27. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. (AEC) Limited..

(28) Interim Condensed Consolidated Financial Statements 2011. The Decree aimed to set an annual, predefined limit to the impact of the tariff component which affects the electricity bill paid by users, while still establishing an overall notable increase in the photovoltaic power to be installed in 2020, rising from the initial 8,000 MW to 23,000 MW. A decrease in incentives was introduced beginning from the second four months of 2011, especially penalising the ground-mounted plants and instead favouring the construction of roof-mounted solar plants. The tariffs will reduce on a monthly basis from June to December 2011, and will then become half-yearly in 2012. Afterwards, the tariffs will have a comprehensive value, also including the valuation of energy injected into the electrical system, with a specific tariff for the amount of self-consumed energy. One of the more significant elements introduced by the new decree is a new procedure for recognising the incentive tariff for so-called large plants. A dedicated log managed by GSE has been established, where the energy account requests for that type of plant must be recorded. In developing activities for the next few years, the new regulation must necessarily be taken into account and investments must be made in applications which allow for being certain about the recognition of incentive tariffs, at the same time working to achieve the cost efficiencies necessary for guaranteeing adequate remuneration. As regards the Cogeneration sector, the joint venture between ACEA S.p.A. and ASTRIM S.p.A. was established in September 2007, aimed at the marketing and creation of energy cogeneration plants, called Ecogena. 51% of the share capital of Ecogena belongs to ACEA Reti e Servizi Energetici S.p.A. and the remaining amount, due to the transfer of ASTRIM’s portion, to the Jacorossi e Parnasi Group. During the first half of the year, the company's operations continued in line with the strategic development plan underway, although the difficult general macroeconomic situation is causing a significant, overall slowdown in the market, as well as in the reference sector. Instead, Legislative Decree 28 of 3 March 2011- Implementation of directive 2009/28/EC on the promotion of energy from renewable sources, had a positive effect in that it extends the current comprehensive incentive tariff system for plants with power of less than 1 MWe.. Report on Operations. 28. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Società Energia Alternativa, which Astrim S.p.A. has a holding in, Vigest S.r.l., and.

(29) Interim Condensed Consolidated Financial Statements 2011. Of even more importance is the Roman Council's approval of Resolution 7 of 14 February 2011, which amends art. 48 of the Municipal Building Regulation (known as "New Resolution 48") with which some of the assumptions for the development of strategic activities in the near future are being changed. In fact, the approval of the Roman resolution may strengthen the value of the company's top technological solution, therefore enabling the generation of an important competitive advantage in the medium-term, which could be reflected in better market penetration, specifically for new and future real estate facilities. From the operational point of view, the integrated management of active work orders allows for striking a balance between monitoring and developing plants that are already operational, freeing up the company to concentrate on developing a market which, as mentioned, is in upheaval. In that light, the company has also hired a new Technical Director, who was previously with a qualified competitor and has long-term experience in the management and realisation of complex energy station projects. In particular, the work of building the cogeneration power plant to serve the Business Park Europarco complex is moving forward. In the next few weeks, the supplier of plant works shall be selected through an internal, restricted tender in which 5 different leading companies were involved. In line with the indications of the 2011-2013 Business Plan, commercial development activities are focused on the acquisition of new industrial customers. The negotiations underway include three Fiorucci S.p.A. food plants and the Novartis S.p.A. pharmaceutical facility. By July, Energy services contracts should be become operational in spring of 2012. The district heating networks intended to supply the Tor Pagnotta and Massimina property complexes are in the feasibility study phase. During the Municipality of Rome Stati Generali forum on 22 and 23 February, the associate EUR Power presented the EUR Smart Grid Energy Development Plan. Specifically, EUR Power continued a detailed analysis of the energy requirements and needs of the largest utilities in the EUR district, also by conducting a targeted series of Energy Surveys in the field. Commercial contacts with potential customers are active, and customers are pleased with the prospective solutions represented by the EUR Smart Grid Plan, which balances energy savings with a positive impact. Report on Operations. 29. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. signed with Sogei and with Cinecittà Parchi for a total of 3.6 Mwe, which will.

(30) Interim Condensed Consolidated Financial Statements 2011. on the environment and on the district. Authorisation procedures have been initiated for the two power plants planned for Piazzale Adenauer and Viale Europa. The activities managed by the Air Quality sector "Sanacaldaia" and "Caldaie Sicure" were carried out in accordance with the contractual extension from 31 July 2007; the current extension covers the period from 31 October 2010 to 15 April 2011. The service was granted again under the same contractual terms and conditions as previously and using prevailing tariffs defined by the Directive Determination 1425 of 2006. As regards managing the Public Lighting service, on 15 March 2011, ACEA and Roma Capitale stipulated an adaptation to the Service Agreement which governs public lighting services; the salient points of the renegotiation are the lengthening of the contract until 2027, making it consistent with the Concession, as well as the revision of qualitative and quantitative parameters. The contract between ACEA and ACEA Distribuzione for the assignment of public lighting in the Municipality of Rome is currently being revised. During the first half of 2011, the new constructions were mainly intended to continue the implementation of the "Suburbs Plan" and the "Extraordinary suburb lighting programme", pursuant to Resolution 256 of 3 August 2010, and the construction of plants in the "Centrone" area pursuant to Resolution 331 of November 2009, all activities commissioned by the current Department IX (formerly XVI). In addition to the above, additional programmes were focused on a series of principal operating areas, set forth below: •. The replacement of 2.7 kV circuits (i.e. from MV to LV plants) led to operations on 111 lighting points;. •. Network renewal: during this first half year, works were executed which involved renovating 247 lighting points, often including maintenance, also carried out on the power supply network;. •. Phasing out of the 8.4 kV network: since the beginning of this programme, 70 MV starters have been phased out;. •. Plant repairs: involves the inspection, extraordinary maintenance and possible renovation to class II of lighting points managed on behalf of Roma Capitale;. Report on Operations. 30. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Most of the projects carried out are part of the "Piano della Luce" (Lighting Plan)..

(31) Interim Condensed Consolidated Financial Statements 2011. •. Plant maintenance: maintenance activities primarily took the form of planned, emergency and extraordinary maintenance;. •. Artistic maintenance: during the first half of 2011, work was carried out on the Villa Paganini, Villa Leopardi, Parco Simone Bolivar and Piazza del Campidoglio plants, for a total of 211 lighting points, and massive works on Tiber river bridges and docks amounted to another 1,661 lighting points. Extraordinary. maintenance. on. various. historically. and. archaeologically. important sites was also ensured; •. energy efficiency initiatives: during 2011, the plan to install LED technology covers on new plants continued, and some of the sodium covers on already operational plants were replaced; in the first half of the year approximately 500 LED lighting points were installed;. •. New works: a total of 1,343 lighting points were constructed for Roma Capitale, with requests coming in mainly from Department IX and SIMU;. •. Districts: 2 new agreements with districts were executed, and include maintenance contracts subject to the condition precedent that the related works must be completed.. Finally, as regards the Digital Meters Project, the large-scale phase for the introduction of a remote-controlled system for the MV and LV networks and remote control of the digital meters launched by Acea in October 2005, is underway in 2011. The approved industrial plan envisages the completion of activities by 2011, with 95% coverage of active users (equal to roughly 1,540,000 meters), as set out by cabinets for the management of new users. Approximately 60,000 meters and 30 concentrator cabinets were installed in the first half of 2011. This made it possible to reach a total of 1,510,000 installed meters, consistent with the objectives defined by the Italian Authority for Electricity and Gas in resolution no. 292/06 - Annex A.. Report on Operations. 31. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. the Italian Authority for Electricity and Gas and other installations of concentrator.

(32) Interim Condensed Consolidated Financial Statements 2011. Energy Industrial Segment As regards the Electricity exchange, this first part of the year involves both a high offer of electricity (63,600 MWh average per hour) which is constantly increasing and on the other hand purchases and sales that are rather weak (35,500 MWh average per hour) and tending to drop. In that context, the electricity purchase price on the Electricity exchange (national standard price), with a 13.6% increase on an annual basis (in absolute terms equalling +8.21 €/MWh), came out at 68.41 €/MWh. This price decreased by almost 3€/MWh compared to the highest level of 2011, reached in May. Furthermore, please note that the level reached in May was the highest since March 2009, correlated to increasing production costs (however, with the spark-spread still negative) and strains on sale prices in the two island zones.. gen mag giu lug ago set ott dic. January May June July August September October December. As indicated, the average energy purchase price in the electricity exchange (national standard price) increased by 13.6% compared to the same period of last year, confirming the trends that have been occurring since the beginning of 2011. The ratio between the price during peak hours and base load dropped to 1.12, therefore establishing an absolute all-time low. Strong price pressures were recorded on the two islands, caused by the reduced offer of combined cycle plants and the closure of transit between Sicily and the continent in the second half of May.. Report on Operations. 32. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Liquidity on the DAM.

(33) Interim Condensed Consolidated Financial Statements 2011. National Standard Price. gen mag giu lug ago set ott dic variazione sullo stesso mese dell'anno precedente. January May June July August September October December change compared to the same month of the previous year. Italia Francia Germania Spagna Area scandinava gen mag giu lug ago set ott dic. Report on Operations. Italy France Germany Spain Scandinavia January May June July August September October December. 33. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Price on the European Power Exchanges (arithmetic mean €/MWh).

(34) Interim Condensed Consolidated Financial Statements 2011. IPEX: the Italian Power Exchange; EEX: European Energy Exchange, the German Power Exchange; PowerNext: the French Power Exchange; OMEL: Compañía Operadora del Mercado Español de Electricidad, the Spanish Power Exchange; NordPool: the Scandinavian Power Exchange (Norway, Sweden, Denmark, Finland); Source: Electricity Market Operator – Monthly trading report – July 2011.. In Italy, there was a tendential decrease in the demand for gas in this first part of the year (- 4%). This decrease mainly reflects a drop in thermoelectric consumption (- 9%), with less significant changes in the domestic and industrial sectors.. gen mag giu lug ago set ott dic Totale prelevato/immesso. Report on Operations. January May June July August September October December Total withdrawn/injected. 34. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Italian Gas Market.

(35) Interim Condensed Consolidated Financial Statements 2011. Regarding the European power exchanges, June is characterised by an essential stability in listings of crude oil and the main European fuels, which reached the highest levels of the last three years. In fact, already since May the series of consistent, consecutive increases which, throughout eight months, had pushed oil prices close to the all-time high values recorded in summer 2008, was interrupted. The Brent fluctuates around 114 $ per barrel, still at the highest levels of the last two years, and decisively increasing compared to that number from 2010 (+ 52.4%). Similar dynamics are also found on oil derivatives. In converting the listings into EUR, the exchange rate, coming in at 1.44 $/€ (+0.5% compared to the previous month, +17.9% compared to 2010), does not cause significant changes in the economic trends of fuels, instead causing a partial slowdown of trends, highlighted by reduced increases between 11% and 29%.. gen mag giu lug ago set ott dic tasso di cambio. January May June July August September October December exchange rate. From 1 April to 30 June 2011, Acea Produzione achieved a production volume of 86.34 GWh through its directly owned plants. This production is broken down into the share relative to running water plants (84.32 GWh), the share relative to "minihydro" plants (0.72 GWh), as well as the share intended for the market (1.30 GWh). In the district heating segment, in which the Company operates through the Tor di Valle plant’s cogeneration unit, the Company supplied 1,815 end users (215. Report on Operations. 35. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Dated Brent price trend.

(36) Interim Condensed Consolidated Financial Statements 2011. apartment blocks and 1,600 building units) located in the Torrino Sud and Mostacciano districts (located in the southern part of Rome) with 42 GWht. Acea Energia sold 1,870.0 GWh of electricity in the market subject to additional safeguards, a decrease of 7.6% compared to 2010. There are 1,198,210 Customers (there are 1,240,969 supply points). The decrease in the number of customers and volumes is linked to the opening up of the market following completion of the liberalisation process. Acea Energia sold 6,333.0 GWh of electricity in the free market, a decrease of 14.23% compared to 2010. As of 30 June 2011, there are 299,186 supply points. The number of end users switching from the regulated to the free market in the first half of 2011 amounts to 112,074 representing an annual volume of 370.5 GWh, with around 32% of users acquired by other wholesalers, whilst the remaining 68% stayed with the company. Acea Energia sold a total of 62.7 million cubic metres of gas to end customers and wholesalers, of which 44.1 million cubic metres were provided by GDF Suez Energy. Report on Operations. 36. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Management. There are 83,183 customers..

(37) Interim Condensed Consolidated Financial Statements 2011. Water Industrial Segment Management of water services in Lazio and Campania ACEA ATO2 S.p.A. Since 2007 the acquisition of contracts with the municipalities involved has slowed. This has been caused by local authorities’ natural political alternation and internal difficulties within the authorities themselves. Moreover, based on assessments carried out, certain municipalities still have problems relating to the state of treatment plants and lack of authorisation for waste disposal. No other Integrated Water Service management was acquired in the first half of 2011.. Drinking water ACEA ATO 2 S.p.A. provides the full range of drinking water distribution services including collection and abstraction, as well as retail and wholesale distribution. Water is abstracted from sources on the basis of long-term concessions. Ten water sources – including five sources (Peschiera, Capore, Acqua Marcia, Acquoria and Salone), 4 well fields (Pantano Borghese, Finocchio, Torre Angela and Torre Spaccata) and the Lake Bracciano Aqueduct – supply approximately 3,000,000 people in Rome and Fiumicino, as well as more than 60 municipalities in the Lazio region, via four aqueducts and a hierarchical system of pressurised pipes. system of Rome. In addition, ACEA ATO 2 S.p.A. manages the Simbrivio aqueduct, which supplies water to 54 municipalities and 3 consortia, the Laurentino aqueduct (formerly CASMEZ Lazio Regional Authority), which supplies the municipalities of Pomezia, Ardea and the Campoleone area in the municipality of Lanuvio, the Doganella aqueduct, serving 8 municipalities in the Castelli Romani area, and the distribution of water in 74 municipalities in addition to Rome. With reference to water quality, following the exceptions granted in 2009 to levels of arsenic, fluoride and trihalomethanes in certain municipalities of the area, 2010 saw the Lazio Region issue an extension to this derogation in regards to the vanadium parameter.. Report on Operations. 37. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Three further sources of supply provide non-drinking water used in the sprinkler.

(38) Interim Condensed Consolidated Financial Statements 2011. In October 2010, the European Community informed Italy of its intention to express a negative judgment on the request for the derogation regarding arsenic of 50 micrograms/l requested by the Lazio Region. In the Municipalities in question, thanks to the works carried out, arsenic concentrations were cut to under 20 micrograms/l and on 20/11/2010 the company submitted a new request for the derogation for said parameter within a maximum allowable value of 20 micrograms/l. The Municipalities involved in the ACEA ATO 2 works are Velletri, Albano Laziale, Castelgandolfo, Genzano, Ariccia, Lanuvio, Lariano, Ciampino, Castelnuovo di Porto Trevignano Romano and Tolfa. Various meetings were held with the Municipalities, Local Health Authorities and the Operating-Technical Secretariat of the Central Lazio Area Authority to agree on an information campaign for citizens, acknowledging the contents of the Explanatory notes published on 30/11/2010 by the Istituto Superiore di Sanità (Higher Institute of Health). In the meanwhile, emergency arsenic containment measures were implemented. On 17 January 2011, the Ministerial Decree of 24 November 2010 was published in Official Journal 12, regarding the exceptions as per art. 13 of Legislative Decree 31/01, with which the Ministry of Health incorporated the Decision of the European Commission of 28 October 2010, to not grant the exception for the arsenic parameter to the Lazio municipalities. With the publication of the aforementioned Ministerial Decree, Presidential Decree T0902 of 30 December 2009 was no longer effective and therefore, as of today the legal arsenic limit of 10 micrograms/l is in force. European Commission's refusal to provide the 50 microgram/l exception to the arsenic parameter, moreover acknowledging that the same Region submitted the new requests for an arsenic parameter of 20 micrograms/l on 23 November 2010 and that the Ministry of Health, with note no. 0049717 of 6 December 2010, indicated that the request submitted responds to the criteria identified by the European Commission, confirming that it is very probable that the EC should soon agree to the new requests for an exception of 20 micrograms/l, indicated that in the current transition phase, it is necessary for all parties involved (Local health authorities, Environmental Authorities and Operator) to work together with the mayors of the municipalities involved to completely and transparently inform the. Report on Operations. 38. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. In note no. 040098 of 31 January 2011, the Lazio Region, acknowledging the.

(39) Interim Condensed Consolidated Financial Statements 2011. population by referring to the notice prepared by the Higher Institute of Health as regards the use of waters and any usage limitations. On 12 February 2011, Order of the Prime Minister 3921 of 28 January 2011 was published in Official Gazette 35, appointing the president of the Lazio Region as the Appointed Commissioner for the arsenic emergency in the Lazio Region, with the duty of implementing all useful actions to begin initiatives of great urgency to guarantee the distribution of water for human consumption that falls within the parameters pursuant to Legislative Decree 31/01. In note no. 42/P of 17 February 2011, Acea Ato2 requested that the Local health authorities responsible for the area communicate usage limitations and suitable measures for continuing to distribute water to the residents involved and that the mayors of the municipalities involved enact those indications with specific ordinances. On 18 February 2011, the permanent Environment and Cooperation amongst populations council commission met for a hearing on the arsenic problem. The presidents of the provinces, the STO ATOs and the integrated water service operators were also invited to attend. During that hearing, the Lazio Region Environmental and Sustainable development councillor, speaking on behalf of President Polverini as the Appointed Commissioner for the arsenic emergency in the Lazio Region, was optimistic about the possibility of obtaining a favourable judgment from the European Commission. The EC granted the judgment to allow the arsenic exception of 20 micrograms/l until 31 December 2012. Neither the Ministry of Health nor the Lazio Region issued any type of formal deed following the EC's ruling. which the Lazio Region should have allowed 160 micrograms/l until 31 December 2011. Again, the Region did not grant the exception. In relation to fluorides, in Presidential Decree T0076 of 11 March 2011, an additional exception period was granted until 31 December 2012, at the fluoride parameter value established in annex I, part B of Legislative Decree 31 of 2 February 2001, within the Maximum Allowable Value of 2.5 mg/l for all of the municipalities in Lazio: Albano Laziale, Ariccia, Ardea, Castel Gandolfo, Ciampino, Genzano di Roma, Lanuvio, Lariano, Velletri, Tolfa and Trevignano Romano. Sewerage and waste water treatment. Report on Operations. 39. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. In relation to vanadium, on 28 March 2011, the Ministerial Decree was issued in.

(40) Interim Condensed Consolidated Financial Statements 2011. The sewerage service comprises a sewage network of about 6020 km (including approximately 4,050 km of network serving the municipality of Rome) and more than 300 km of collectors. ACEA ATO 2 S.p.A. manages the waste water treatment system and pumping stations that serve the network and sewage collectors. Some of them are quite large, with a throughput of more than 10 cubic metres/sec, and in some cases they also provide flood protection. In the first half of 2011, the main waste water treatment plants handled 302 million cubic metres, an increase of around 0.5% compared with the same period of the previous year. Sludge, sand and grating production for all managed plants was equal to 79,972 tonnes, up approximately 9.5% compared to the first half of the previous year. At the end of June 2011, ACEA ATO 2 S.p.A. managed a total of 486 sewage pumping stations, including 167 in the municipality of Rome, and a total of 172 waste water treatment plants, including 35 in the municipality of Rome. Research and development In cooperation with LaboratoRI S.p.A., activities were continued to analyse distribution networks and research leaks according to the district metering approach set out in Ministerial Decree 99/97. During the first half of 2011: •. In the municipality of Monterotondo, on request of the Northern Area, the mathematical model of the Monterotondo Centro network was created to simulate the interconnection between the two main abstraction pipes, the alternative structure that allows for phasing out the Palazzo Comunale (City Hall) reservoir. At the same time, two monitoring campaigns were implemented on the entire network, which allowed for calibrating the complete model, which made it possible to create a preliminary planning of the districts, also in order to focus the works on the future creation of a new permanent structure. To this end, this intervention's priority, already set forth and in the planning phase, to bring the Valga delle Roscie abstraction pipe directly to the Cappuccini reservoir was reiterated.. •. In the municipality of Grottaferrata - Rete Colle delle Ginestre, the survey of the secondary network and the update of the mapping was further developed.. Report on Operations. 40. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. Marcio and Valga delle Rosce aqueducts, and the water centres, to plan an.

(41) Interim Condensed Consolidated Financial Statements 2011. •. In the municipality of Grottaferrata - Rete Villa Rasponi, a series of joint inspections were carried out with the staff of the Southern Area and with Works Management to verify the projects required in order to divide the network into districts, according to the optimum structure project drawn up at the end of 2010.. •. In the municipality of Riano, the capacities and pressures in the upper network (Quartarella – Risoluti – Matteotti) were monitored, enabling a calibration of the mathematical model. On request of the Northern Area staff, support was provided for the network adjustments necessary to make Risoluti reservoir operational once again.. •. The permanent active leak control system was implemented in the municipality of Santa Severa. Following the plan drawn up in 2010, a timed control device was installed on the valve that decreases pressure being input into the network and a fixed capacity, remote controlled meter was also installed. Active pressure regulation provided savings of approximately 6 l/s on the average capacity injected into the network, which equals a loss decrease of approximately 30%. However, the critical conditions of the network and the high level of residual loss require that the physical loss be recovered.. •. In the municipality of Cerveteri, the pressures and capacities were monitored in the critical district of Lantinella, which also allowed for calibrating the model on this part of the network. Afterwards, the structure was improved thanks to the work carried out by the Western Area, with the replacement of the district's input sewage pumping stations.. •. Furthermore, monitoring was conducted in order to assess the effects of the abstraction pipe and the Reservoir. Priority activities were defined in accordance with the Western Area to create the optimum structure. The opportunity to supply the Via Zambra zone and the Cerenova network with a direct line from the abstraction pipe was assessed; this would isolate these zones from the rest of the network, actually creating two districts. For the historical centre network, the most complicated to divide into districts, inspections have begun to verify the presence and moveability of the sections necessary to create districts.. Report on Operations. 41. WorldReginfo - 4b29cc6a-ad94-42ed-8708-6fcc66cb3817. significant work that was carried out on the connection between the Peschiera.